Networks and Data Ecosystems Essential for the Medtech Industry's Circular Future
“In our current economy, we take materials from the Earth, make products from them, and eventually throw them away as waste – the process is linear. In a circular economy, by contrast, we stop producing waste in the first place.”
The concept of circular economy is not limited to only manufacturing or waste management sectors – it is crucial for every industry, especially MedTech and healthcare. Owing to increasing environmental damage and pollution rates caused by large corporations, other equally responsible sectors have been overlooked in the public domain.
MedTech is any technology used to save the lives of people suffering from a wide range of conditions. It can range from syringes and latex gloves to heart values and pacemakers or replacement joints for knees and hips to total body scanning machines.
The future of MedTech lies in the power of networks and data ecosystems, enabling the industry to build a circular and resilient healthcare ecosystem. Data ecosystems include various actors, like services, and software applications that use data to share and utilize it economically or socially. In many circular economy scenarios, this involves the network or the networking of companies. “By making these changes, transformation of the medical device industry to a more circular economy would advance the goal of providing increasingly complex care in a low-emissions future.”
What does a circular economy look like for MedTech?
This scenario would mean that the companies stop looking at the life of a device as linear (production through consumption). Instead, these same organizations would look at the “consumed” product as the raw material for another product. End-of-life is extended, device-cost-per-use goes down, and there is more control of the supply chain. The device does not end up in the landfill after only one use.
In the following article we will provide experience-based insights on why MedTech companies must embrace networks and data ecosystems to navigate this complex landscape. Furthermore, we will show how companies managed to harness the power of connectivity and data-driven insights to meet the demands of a circular economy and beyond - ultimately thriving in a sustainable future.
Not If but when: Five reasons why the circular economy is crucial for MedTech
Barriers to circularity in the MedTech industry include perceptions regarding infection prevention, behaviors of device consumers and manufacturers, and regulatory structures that encourage the proliferation of disposable medical devices.
Even with these barriers, our experience shows that there are several significant reasons why MedTech companies need to invest in circularity, including:
- Regulatory compliance: By closing raw material loops and thereby reducing the product carbon footprint, the circular economy is a crucial element in a wide range of relevant frameworks and regulations (e.g., UN Sustainable Development Goals, Paris Agreement, Green Deal, etc.) and therefore an imperative to avoid fines and penalties.
- Resource Efficiency and Cost Savings: In times of rising material prices, using recycled or reclaimed materials leads to cost savings in raw material procurement, production, and waste management thereby improving the company's profitability and operational efficiency.
- Resilience and Supply Chain Stability: By reducing the dependence on scarce resources and minimizing vulnerability to price fluctuations or supply chain disruptions, circularity contributes to mitigating the risks associated with decoupling, climate change, resource depletion, and economic instability.
- Access to Sustainable Financing and Investors: Companies that embrace circularity are more likely to attract sustainable financing options and gain the interest of investors seeking companies with strong ESG performance, ultimately providing access to capital for growth and expansion.
- Development of new business models: Circularity drives companies to innovate in product design, business models, and operational processes leading to the generation of new revenue streams and services that provide ongoing revenue instead of relying solely on one-time sales.
Catena-X: The crossroads of data, infrastructure, and service
Let’s explore how circularity is improving industries like Automotive and ways in which we can apply these insights to the MedTech industry.
Increasingly stricter environmental regulations regarding electric mobility, rising prices of raw materials, and supply chain shortages provided an impetus/incentive for the German Association of the Automotive Industry (VDA) to start the development of Catena-X in 2020. This became one of the first and biggest circularity-focused digital ecosystems that connects companies throughout the automotive value chain.
The mission of Catena-X is to enable the digital flow of information across the entire supply chain from manufacturers to suppliers and service providers. Catena-X develops a digital map of the circular economy in the automotive industry - with more than 2,000 partners and across all levels of the value chain. This digital infrastructure enables secure and trusted end-to-end data exchange, facilitates supply chain optimization, supports new business models, and promotes innovation.
Data is a fundamental building block of the circular economy. It refers to the structured and standardized information exchanged within the ecosystem. This data includes product information, supply chain data, production data, vehicle data, and customer-related information. The data is collected, stored, and shared in a standardized format, enabling interoperability between different systems, and facilitating seamless collaboration between partners.
Another essential building block for the digital mapping of value-added processes over the entire life cycle in Catena-X is the European Union’s Digital Product Passport (DPP). This tool creates transparency and unlocks circularity proposed by the European Commission that will share product information across the entire value chain, including data on raw material extraction, production, recycling, etc. Digital product passports function as a holistic digital twin and play a crucial role in closing the information loop by providing actionable insights on ownership, materials, and lifecycle events.
The Battery Passport, a version of the DPP, represents the first use case of collecting information across different companies starting with the extraction of raw materials which was vital for Catena-X as it laid the groundwork for key issues in transparency and data availability. It even captured individual battery cells composition and high voltage storage. Moreover, it collected dynamic data from the use phase to the dismantling and recycling processes until the final life cycle stage.
The Battery Passport was key in facilitating the rapid scaling of sustainable, circular, and responsible battery value chains to meet the targets of the Paris Agreement through electrification of the transport and power sectors. And these accomplishments happened during the development state of the Battery Passport. In fact, a Battery Passport prototype was officially released by the Global Battery Alliance during the World Economic Forum’s Annual Meeting in Davos in January 2023.
The information collected is used for more precise calculation of reference values, the optimization of production processes and data-based decisions, (e.g., whether a battery can be used as stationary storage unit at the end of a vehicle's life cycle or which measures are suitable for achieving the highest possible recycling rate).
The infrastructure of Catena-X consists of the technical framework and digital infrastructure necessary to support data exchange and connectivity. It includes standardized communication protocols, Application Programming Interfaces (APIs), cloud computing resources, and security measures. This infrastructure enables the seamless flow of data and information across different stakeholders in the automotive value chain.
With transparency along the value chain and the associated knowledge regarding the origin of materials as well as the product carbon footprint, Catena-X members are well prepared to tackle future regulations and are already seeing savings per year by avoiding import duties and penalty payments.
Catena-X also encompasses a wide range of value-added functionalities and applications built on top of the infrastructure and data components. These services include analytics, predictive maintenance, supply chain optimization, digital twin simulations, and other digital tools that enhance operational efficiency and decision-making. By leveraging shared data and infrastructure, these services enable stakeholders to gain insights, optimize processes, and create new business models.
In addition to the effects on productivity/savings, Catena-X enabled the pioneers of the battery passport to communicate with one voice to the government institutions and thereby influence the establishment of standards.
Connecting Catena-X to the MedTech industry
Our experience with Catena-X demonstrates that it is not a question of if - but rather of how quickly - one can start building comparable circular structures. It will indeed take time. In fact, it took three years to establish Catena-X as a case study for the circular economy despite this project having the highest prioritization at the board level, the establishment of cross-divisional teams, and the empowerment of IT systems. It is critically important to not underestimate the time needed to adequately ensure the network connectivity and data availability required to implement circularity in an industry.
Catena-X should serve as an example to the MedTech sector that companies can only succeed in meeting stricter requirements (such as CO2 emissions standards, recycling quotas, etc.), with the help of circular material and raw material cycles by working together with partners along the value chain.
The automotive industry shows that cooperation between OEMs and suppliers can happen and that continuous data flows can be established along the product life cycle thereby creating value for all involved. At the same time, it is evident that technologies such as digital twin or product passports play a decisive key role along with the alliance of companies.
Importantly, Catena-X serves as an example and lessons and proof of concepts learned from it, in our opinion, can be transferred and adapted to other industries. . Even though Catena-X has a strong focus on current activities in the EU, we believe the findings can also be applied to other regions such as the USA or APAC. Technologies and solutions such as the digital twin or product passports can be established and used independently of regional markets.
Making circularity a reality in MedTech
According to a recent Health Affairs report, “Transition to a circular economy begins with a commitment to high-value care. This broader framework can drive efficiency of facilities operations with respect to energy and waste management and can nudge clinicians to be mindful of resource consumption and to select environmentally preferable drugs and devices where choices exist. Adoption of such high-value principles in procurement will foster circular and ethical supply chains.”
But the transformation to a more sustainable or circular economy can’t just be for philanthropic reasons. There is a strong business case for these changes to ensure competitive advantages for MedTech companies.
Even if all the regulations and adoption drivers are not applicable to your organization today, turning a blind eye to the need to change will have adverse effects in the future. Decisions made today influence whether MedTech companies can contribute significantly to a sustainable healthcare system while remaining at the forefront of innovation.